A revival in Europe's appetite for initial public offerings (IPO) appears to be well underway, providing evidence of improving investor and business confidence after a lull in 2016.
Last week the sale of a quarter of Allied Irish Banks – largely state owned since its bail out in 2009 – raised €3bn for the Irish government, the largest European IPO this year
And last month, technology group Alfa Financial Software completed London's biggest listing of the year – a £1bn offering that many hope will encourage further IPO activity from the tech sector.
Recovery taking shape
During the first half of this year to date, 125 European listings have raised $18.1bn (€15.9bn), according to data from Dealogic. This marks a striking acceleration in activity given the slow start to the year. In the first half of 2016, 116 European listings raised $16.8bn.
In the first quarter the total value of IPOs in Europe from 53 listings was €4.5bn according to PWC's IPO Watch Europe – less than half of the most recent three-month period, but still 28% more than the €3.5bn raised in the first quarter of 2016.
Although first-half activity in 2017 has outpaced the similar period in 2016, it was only half the value of funds raised in the first six months of 2015 – with 162 deals raising $36.1bn.
But the recovery is taking shape.
And with central banks appearing to be on hold from any policy moves for at least the rest of the year issuers are reviving plans that were put on hold in the second half last year.
In 2016, the market all but dried up after Britain voted to leave the European Union and expectations rose that elections on the Continent would return anti-EU candidates.
London leads Europe’s listings
Most activity was driven by the London Stock Exchange with nearly half of the total value of IPOs being raised on the LSE.
"A strong medium term pipeline of both domestic and foreign issuers suggest that London is well placed to continue as Europe's premier exchange as the UK negotiates its exit from the EU," says Mark Hughes, capital markets leader at PWC.
Globally, the Asia-Pacific region has dominated the IPO market this year, with China exchanges the busiest during the first half with 317 new listings and Southeast Asia 48, Australia and New Zealand 45, and Japan 38.
Meanwhile, in the US more companies are listing this week than during any other five-day period over the past two years – with 10 IPOs – driven by record setting equity markets.
Healthy IPO pipeline
Back in London, further large IPOs are expected this year. Among the rumoured offerings are Tesco Bank, First Utility, Compare the Market, O2 and Sky Betting & Gaming.
"Issuers will continue to be attracted to London by the liquidity of the financial markets, the depth and breadth of the investor base and the regulatory and business framework," says Hughes at PWC.
In spite of the acceleration in offerings, some believe certain sectors are becoming overstretched.
Valuations among existing stocks in the technology sectors for example are high following a year-long rally.
Fergus Shaw at Cerno Capital believes overvalued stocks and IPOs present heightened risks for investors.
He says: "Twitter’s oversubscribed shares lost half their value since going public. The dotcom bubble teaches us that the industry is rarely aware of the extent of mania until it is too late."
Snap, parent of internet messaging company Snapchat, is a similar story: Pricing at $17 in March, shares immediately hit a high of $29.44 before falling back to the offer price.
Shaw adds: "Do not give up on dominant, well-run and profitable investments."